Abstract [en]

This paper investigates the relationship between industrialization, electricity consumption and CO2 emissions in case of Bangladesh using quarter frequency data over the period of 1975–2010. The ARDL bounds testing approach is applied to examine cointegration in the presence of structural breaks stemming in the series. The causal relationship among the variables is explored by applying the innovative accounting approach (IAA).

Our results indicate that the variables are cointegrated for a long run relationship. We find that financial development adds in energy pollutants. Electricity consumption contributes to CO2 emissions. Trade openness also has a positive impact on energy pollutants. The results unveil that EKC is existed between industrial development and CO2 emissions in case of Bangladesh. Our causality analysis shows that electricity consumption Granger causes energy pollutants, industrial growth and financial development. The unidirectional causality exists running from financial development to trade openness and trade openness Granger causes industrial development. This study opens up new insights for policy makers in formulating a comprehensive economic, financial and trade policy to sustain industrialization by improving the environmental quality.